Zip Co Ltd

Expects to achieve more than $1 billion in annual transaction volume in FY 19: Zip Co Ltd.’s (ASX: Z1P) stock has risen 31.40% in three months as on September 26, 2018 after the company  for FY 18 reported 138% growth in the revenue to $40.4 million with Transaction volume growth of 136% to $542.9 million. The company’s net bad debt is now below industry standards and it has achieved cashflow breakeven on a monthly basis in 4Q18. Meanwhile, Z1P has signed a partnership with Target Australia Pty Ltd for offering customers interest-free payments. Target is a renowned brand in the Australian retail landscape, with operations of a national network of 303 stores and has a large online presence. Z1P will provide Target customers a seamless checkout experience (both online and in-store customers). It is expected that this will be live throughout the Target network, both online and instore, by mid October 2018. The company has also signed the partnership with Virgin Australia for providing Zip interest-free payments for its travel business. Moreover, Z1P’s app Pocketbook achieved all performance milestones set at the time of its acquisition by the company in September 2016. Z1P’s shares to be issued within two years from completion of the acquisition, were subject to the achievement of various performance milestones. The final performance milestone was met in August 2018, and accordingly 1,887,942 shares of Z1P will be issued to the shareholders of Pocketbook under the provisions of the share purchase agreement. Additionally, for FY 19, the group expects to achieve more than $1 billion in annual transaction volume and more than $1 billion consumers with an active Zip account. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $ 1.155.
 

Outlook for FY 19 (Source: Company Reports)
 

EML Payments Ltd

Enhancing acquisitions with significant GDV, Revenue & EBTDA growth: EML Payments Ltd.’s (ASX: EML) stock has risen 15.94% in three months as on September 26, 2018 after the company for FY 18 delivered 43% growth in EBITDA to A$20.8m as all regional business units generated EBITDA growth and improved against the prior year. The revenue grew 23% over the prior year to $71.0m, with 75% of revenues generated from offshore and 92% of revenues were recurring in nature (excluding one-time establishment fees). The revenue growth was primarily organic in nature, on the back of 53% increase in Gross Debit Volume (GDV) to $6.75 billion across all regions and sales segments. However, the gross margins fell marginally to 75% from 76% due to growth of the Reloadable vertical in Australia, Europe & North America. Further, in 2018, EML has acquired 100% of Presend Nordic AB and 74.86% of Perfectcard. Meanwhile, EML has signed a deal with GVC in late June 2018, and a launch is expected within FY19. Neobank & crypto currency programs are also expected to launch in FY19, including the company’s first Reloadable product in the Nordics. The integration of Presend Nordic AB onto EMLs platforms from FY19, will allow the Group to leverage EML's treasury services and Mastercard private label BINs which will significantly increase revenues on its cards’ programs. Further, Presend has operations across 11 countries, 6 of which EML had no presence in. This will provide a good base for EML to expand through a well-connected and experienced player while being supported by existing EML infrastructure, that will allow the Group to continue to scale. Moreover, in FY19, Perfectcard is projected to contribute ~ A$400k - A$600k in EBTDA to the Group (74.86% ownership) after first year integration costs. In FY18, EML had signed agreements with several major gaming customers including Fortuna & GVC that are expected to launch Reloadable programs in FY19. Additionally, EML has made partnership with German shopping mall operator ECE Projektmanagement G.m.b.H & Co. KG (‘ECE’) to manage the new consumer gift card program, which is expected to be fully launched in Q2 of FY19 and deliver annualised GDV of approx. $142 million. The company has planned to launch in H1 FY19 key new reloadable programs in Europe. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $ 1.600.
 
 

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